The Whole Elephant
October 17, 2011 § Leave a comment
There is a very old story about some blind men describing an elephant. One grasped the tail and concluded that elephants were like ropes. Another touched a leg and declared that elephants were like trees. Another, who touched a husk, said elephants were like pipes. Etc.
For the next fourteen months, we will be subjected to a barrage of rhetoric and bombast concerning the nature of the present recession, its origin, its cause, and its nature. Objective analysis will be hard to come by because everyone who speaks will be persuading, not informing. Each partisan, like the blind man in the story, will focus on the part of the story that fits his or her argument.
As Lao Tzu said of the Tao, “Those who speak, do not know. Those who know, do not speak.”
My effort with this post is to offer an article that, to me at least, comes very close to describing all pertinent information about the current recession, and assesses blame and excuse with apolitical objectivity. The article is a long one, but I think it is worth the time to absorb it. Ezra Klein, a columnist for the Washington Post, wrote it. Here is a link to Could This Time Have Been Different ?.
I have not abandoned my role as an advocate. Based on their performance so far, I have no doubt that truth will be the Republicans’ worst enemy. That is my reason for distributing this article to as many people as possible. My friend, Milton Lower, who operates a kind of one-man Committee of Correspondence, like the patriots who kindled the American Revolution, sent a copy of Klein’s article to me and others on his list. I was too distracted to notice it when it arrived in my inbox, but he was kind enough to rouse me with a follow-up email and I finally read the article last night.
Ezra Klein did a good reporter’s job of getting the facts, organizing them, and publishing them in plain English. The result is scary and grim but, to me, it tells it like it is.
Based on Klein’s article, it is plain to me that federal funding of infrastructure rebuilding and repair is an effective way to reduce unemployment. Another quick and effective way is to offer earmarked federal funds to state and local governments for retaining and rehiring public employees. Both of these measures would directly create jobs and put potential consumer demand money in the pockets of working class Americans. I recognize that the “debt overhang” consisting of credit card and mortgage debt would absorb some of that money but a part of it would be spent on groceries, education and electronic tools, like phones and computers, all of which would stimulate local businesses.
How to unwind the mortgage debt that is dragging down the economy is a difficult issue. Federal funds to pay down some of that debt would run into the rage expressed by Rick Santelli in his rant about “responsible” mortgagors’ tax money being used to defray “underwater” neighbors’ mortgage debt. Solving the problem with some kind of “controlled inflation” would devalue the mortgage debt and, theoretically make it easier to pay off.
I suppose the inflation solution assumes that salaries and wages of the mortgagors would increase apace with inflation and that they could, therefore, more easily make their house payments. I am somewhat skeptical of that assumption, but I understand the theory. I have a personal objection to the inflation idea because, since I am no longer practicing law and, thus, have no income, inflation would mean that my costs would increase but not my ability to pay for them. I also think that inflation would be a cruel burden on unemployed workers, trying to sustain themselves on stingy welfare and dwindling savings.
I would love to see some solution to the housing bubble that involved paying down underwater mortgage debt with a dedicated surtax on Wall Street banks and other financial entities that profited from creating the housing bubble. Like most things I would like, such a solution is probably not politically doable, although I think it would be easily politically marketable.